Oil Rush A Cash Cow For Some Farmers, But Tensions Crop Up

A drilling site rises from the middle of farmland near Fairfield, N.D. Many farmers and ranchers are profiting from the state's oil boom, but others complain that drillers are interfering with their business.

Cows graze in a field south of Watford City, N.D. Despite huge growth in the oil industry, agriculture remains North Dakota's largest industry.

Jeff Brady
/ NPR

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Originally published on January 30, 2014 10:00 am

A remarkable transformation is underway in western North Dakota, where an oil boom is changing the state's fortunes and leaving once-sleepy towns bursting at the seams. In a series of stories, NPR is exploring the economic, social and environmental demands of this modern-day gold rush.

Donny Nelson is a third-generation farmer and rancher near Keene, N.D., a rural community located in the center of an oil rush.

Oil booms come with the territory here, Nelson says, but usually they're not this intense. "This is a completely different animal than we've seen before. I've seen about three oil boom-busts."

That third boom is now — and there's no sign of a bust yet. The state is now pumping out 10 times more oil than it produced a decade back, making it second in crude production, behind Texas, according to the U.S. Energy Information Administration.

Despite that growth, agriculture remains the No. 1 industry in North Dakota. Deep below the prairie, in the Bakken shale formation, there are billions of barrels of oil, much of it now recoverable because of technologies like fracking.

But aboveground, you'll often find cattle or durum wheat. Many farmers and ranchers have benefited from the oil rush — some are even getting rich. But the rise of the oil business has created some tension.

A Mixed Blessing

A short drive from Nelson's house, more than a dozen huge drilling rigs tower as tall as grain elevators over snow-covered fields. All those wells mean a lot more activity in a place that used to be very quiet.

Nelson says this has hurt a key indicator for his cattle business: fertility. Most of his herd had a 96 percent pregnancy rate this year, but that number was much lower in a field where oil-related construction was underway.

"I think it was because they run a pipeline straight dead through the middle of the pasture. They were young cows — should have been fine — and we only got about 55 percent on them," Nelson says. "They looked horrible when we brought them out of the pasture — they were skinny."

Farmers learned of another downside to the oil boom this past harvest season, when space on railroads was at a premium. The state's rail system was built for agriculture, but now it's also hauling oil — a lot of oil. That's squeezing farmers who rely on trains to ship their product.

"Earlier this month, [space on February trains] was trading at $3,000 a car," says Dan Mostad, grain marketing manager at Berthold Farmers Elevator in Berthold, N.D. "In normal times, February freight is worth around $150 a car."

The boom is also transforming rural towns long dominated by agriculture. Marilyn Hudson has lived most of her 77 years on the Fort Berthold Indian Reservation in Parshall, N.D. The oil rush, she says, has been a mixed blessing.

On one hand, it's bringing new life to towns that have struggled to grow, she says. "Sometimes you drive through a small town in North Dakota — especially western North Dakota — and all you find is a bar and a senior center."

That pretty much tells you who is left, she adds.

Hudson says Parshall was headed that direction, too, but now the two-lane highway nearby has a lot more traffic and there are plans for a big new hotel. All the activity has become a burden for some longtime residents, and Hudson says a few moved to Bismarck or even out of state.

"They say, 'We just don't want to put up with the dust, the traffic, the people.' So [the oil rush] has definitely changed the lifestyle," Hudson says.

'Most People Have Made Adjustments'

North Dakota's governor, Republican Jack Dalrymple, is a focus for many concerned about the effects of the drilling boom. Last year, some political opponents tried to launch a criminal investigation over oil industry contributions his campaign received. A judge dismissed their petition.

Dalrymple, a farmer himself, says the oil boom is helping agriculture in the state. Along with oil, drillers are producing a lot of natural gas, and that can be turned into fertilizer.

"We're in the process of developing two huge nitrogen fertilizer plants in North Dakota," Dalrymple says. "That is nothing but great news. That means more nitrogen fertilizer available locally to our people."

And Dalrymple points out that North Dakotans are becoming a lot richer. Per capita personal income in the state has more than doubled in the past decade to $54,871 per year, according to the U.S. Bureau of Economic Analysis. That's more than $11,000 higher than the national average.

Even farmers who don't own the rights to the oil under their land can earn extra money by charging drillers for using the surface. "On the whole, I think most people have made adjustments and are taking advantage of the situation," Dalrymple says.

Back on Donny Nelson's ranch, his family is earning royalties on the oil extracted from their land. But that extra money doesn't replace what's lost, he says.

"I just think that if people ever came here and looked at it — what it was before and what it is now — they'd be concerned. It's a unique area, changed forever now, probably," laments Nelson.

This week, we're taking a close look at the oil rush in North Dakota. The state is pumping out more than 10 times as much oil as it was a decade ago. That makes it the number two state in crude production, behind Texas. Despite that growth, North Dakota's top industry is still agriculture. Many farmers and ranchers have benefited from the oil boom, some are even getting rich.

But as NPR's Jeff Brady reports, the boom has also created plenty of tension.

JEFF BRADY, BYLINE: We're on a ranch in western North Dakota, where a blue tractor is lifting a big, round bale of hay. This is the heart of the North Dakota oil boom. Deep below in the Bakken shale formation there are billions of barrels of oil, much of it now recoverable because of technologies like fracking. But above the ground, you'll often find cattle or durum wheat.

We're here to talk with Donny Nelson. He's a third-generation farmer and rancher. He says oil booms come with the territory, but usually they're not this intense.

DONNY NELSON: Oh yeah, this is a completely different animal than we've seen before. I've seen about three oil boom-busts.

BRADY: This is the third and now it's clear the boom is real and there's no sign of a bust yet. We leave the horses and drive about two-and-a-half miles to snow-covered fields. There, huge drilling rigs rise up as tall as grain elevators.

NELSON: Six, seven, eight, nine, 10, 11, 12 in a row here.

BRADY: All those wells mean a lot more activity in a place that used to be very quiet. Nelson says this has hurt a key indicator for his cattle business: pregnancy rates. Most of his herd came in at 96 percent this year, except one field where there was construction and the number was much lower.

NELSON: I think it was because they run a pipeline straight, dead through the middle of the pasture. And they were young cows, should have been fine, and we only got about 55 percent on them. And they looked horrible when we brought them out of the pasture. They were skinny.

BRADY: Farmers learned of another downside to the oil boom this past harvest season: When space on railroads was at a premium. The state's rail system was built for agriculture, but now it's also hauling oil - a lot of oil. On top of that, the boom is transforming rural towns.

Marilyn Hudson has lived most of her 77 years in Parshall, North Dakota, on the Fort Berthold Indian Reservation.

MARILYN HUDSON: Sometimes you drive through a small town in North Dakota, especially western North Dakota, and all you find is a bar and a senior center.

BRADY: Hudson says Parshall was headed that direction but now the two-lane highway nearby has a lot more traffic. And there's plans for a big new hotel. Hudson says that's prompting some longtime residents to move away.

HUDSON: They say we just don't want to put up with the dust, the traffic, the people, you know. And so, it has definitely changed the lifestyle.

BRADY: North Dakota's Republican governor, Jack Dalrymple, is a focus for many concerned about the effects of the drilling boom. Last year, some political opponents tried to launch a criminal investigation because of oil industry contributions his campaign received. But a judge dismissed their petition. And Dalrymple, who is a farmer himself, contends the oil boom also is helping agriculture.

GOVERNOR JACK DALRYMPLE: We're in the process of developing two huge nitrogen fertilizer plants in North Dakota.

BRADY: Along with oil, drillers are producing a lot of natural gas and that can be turned into fertilizer.

DALRYMPLE: That is nothing but great news. That means more nitrogen fertilizer available locally to our people.

BRADY: And Dalrymple points out that North Dakotans are becoming a lot richer. Per capita personal income in the state has more than doubled in the past decade to almost $55,000 a year. That's $10,000 more than the national average. Even farmers who don't own the rights to the oil under their land can earn extra money by charging drillers for using the surface.

NELSON: On the whole, I think most people have made adjustments and are taking advantage of the situation.

BRADY: Back on Donny Nelson's ranch, his family is earning royalties on the oil extracted from their land. But the extra money doesn't replace what's lost.

NELSON: I just think that if people had ever came here and looked at it, what it was before and what it is now, they'd be concerned. It's a unique area, changed forever now probably.